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Matt O'Sullivan
August 23, 2007

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AdvertisementTOLL HOLDINGS has made it clear a takeover of Brambles is within its sights after trumpeting the benefits of building a stake in the world's largest pallet hire business.

Just hours after Brambles posted a 36 per cent rise in profit after tax from continuing operations to $US586 million ($729 million) for the year, Toll's chief executive, Paul Little, revealed his intentions to buy a Brambles stake were on the drawing board well before it split off its ports and rail operations into Asciano in June.

Toll has spent $83 million so far buying a stake of just under 1per cent in Brambles, while its offshoot Asciano has taken its holding via a subsidiary of Macquarie Bank to almost 4per cent.

"We are not disclosing at this stage the structure or if in fact … we will be attempting to put in place a merger or any other form of structure with Brambles," Mr Little told a briefing in Melbourne yesterday. "[But] we think it's a company that has a lot of upside for us, particularly out of Australia."

Mr Little's statements imply that Asciano's chief executive, Mark Rowsthorn, was aware of Toll's plans for Brambles months ago because, until June, he sat on Toll's board. But despite the posturing, Brambles stayed silent yesterday.

Mr Little said Toll was "enthusiastic" about integrating pallets into its supply chain in Asia where it wanted to expand.

Apart from interests in Brambles, Toll has maintained its aggressive acquisition strategy with several deals in play, including mopping up minority shareholders in Toll New Zealand. The company's chief financial officer, Neil Chatfield, yesterday made clear the company had "enormous capacity" to expand via acquisitions in Australia and Asia..

After announcing a profit largely in line with expectations, Brambles's chief executive, Mike Ihlein, refused to be drawn on Asciano's intentions, despite speaking to Mr Rowsthorn twice since the company began building a stake in early August. Analysts questioned Mr Ihlein about whether it would make more sense for Brambles to take over Asciano, but he would say only: "My very brief answer: can't comment. We have all adopted a position that we don't comment on speculation."

Brambles lifted earnings after its US CHEP pallet business shrugged aside a downturn in grocery retailing. But its European CHEP operation continued to disappoint as sales rose only 2 per cent amid increasing timber prices. Brambles will pay a final dividend of 17c a share on October 11, up 26 per cent on 2005-06, which take the full-year payout to 35c.

Meanwhile, Toll posted a 61 per cent rise in full-year profits to $264 million. The company will pay a final dividend of 11c a share on October 3, which takes the full-year payout to 27c.